California’s Labor Market Weakens With Fourth Consecutive Job Decline
California’s labor market entered a more fragile phase in September 2025, recording its fourth straight month of job losses and pushing the state to the highest unemployment rate in the country. The slowdown marks a notable shift for an economy that has long relied on technology, professional services, and population-driven growth to outperform national trends. Instead of a broad-based downturn, the latest data reveal a more uneven reality, with sharp losses concentrated in specific industries and regions, while other sectors and counties continue to add jobs.
The statewide unemployment rate rose to 5.6% in September, placing California above every other state. That figure reflects both job losses and slower hiring, particularly in higher-wage professional and business services roles. At the same time, healthcare, government employment, and parts of the leisure economy continue to expand, creating a labor market defined more by imbalance than collapse.
Why California Is Losing Jobs For A Fourth Straight Month
California lost an estimated 4,500 jobs in September 2025, extending a decline that began earlier in the summer. Four consecutive months of losses point to more than seasonal volatility, especially given the size and diversity of the state’s economy. While national employment data over the same period showed modest growth, California continued to move in the opposite direction.
The rising unemployment rate reflects a combination of layoffs, slower hiring, and longer job searches, particularly in sectors tied to corporate investment and discretionary spending. Professional services and technology, once the state’s strongest engines of growth, have become the largest sources of contraction. This shift has pushed California’s labor recovery further behind the national average and raised concerns about the durability of its post-pandemic economic model.
Which Industries Are Losing The Most Jobs In California
The largest job losses in September occurred in professional and business services, a broad category that includes technology, legal services, accounting, consulting, advertising, and scientific research. This sector shed roughly 10,400 jobs in a single month, making it the primary driver of California’s employment decline. Within that group, scientific research and development firms, legal offices, and accounting services experienced some of the steepest reductions.
Trade and transportation also recorded significant losses, with approximately 8,700 jobs disappearing during the month. These declines suggest weakening demand across supply chains and logistics, as well as reduced consumer activity affecting retail distribution.
The ongoing wave of tech layoffs remains a central factor. Large companies with substantial California footprints have continued workforce reductions throughout 2025. These cuts span major corporations and smaller startups alike, reflecting cost controls, restructuring, and shifts toward automation and artificial intelligence. While investment in new technologies continues, hiring has not kept pace, leaving fewer roles available across the broader tech ecosystem.
Which Industries Are Still Adding Jobs Statewide
Despite the overall downturn, several sectors continue to add jobs and provide stability to California’s labor market. Private education and health services emerged as the strongest source of growth, adding approximately 13,100 jobs in September. This sector has now logged job gains for dozens of consecutive months, driven by an aging population, expanding healthcare needs, and steady demand for social services.
Leisure and hospitality also recorded gains, adding about 5,600 jobs during the month. Growth was strongest in performing arts, spectator sports, and special food services, suggesting ongoing demand for entertainment and tourism-related activities. These gains came even as some restaurant segments continued to struggle.
Government employment showed modest increases as well, particularly in education-related roles. While these gains are not large enough to offset private-sector losses statewide, they have played an important role in stabilizing employment in certain regions.
How Job Trends Differ Across California Counties
California’s job losses are not evenly distributed, and county-level data highlight sharp regional differences. Some areas continue to outperform the state average, while others reflect deeper structural challenges.
San Luis Obispo County posted an unemployment rate of 4.8% in September, well below the statewide figure. Although the county lost roughly 200 nonfarm jobs month over month, government employment added about 400 positions, partially offsetting private-sector declines and contributing to overall labor market stability.
San Diego County also outperformed the state, with unemployment falling to 4.9%. While the county experienced modest job losses overall, gains in government, private education, and health services helped counter declines in agriculture and leisure-related roles.
Los Angeles County presented a more mixed picture. The unemployment rate stood at 5.7%, slightly above the statewide average, and nonfarm employment actually increased by approximately 5,900 jobs between August and September. Government employment, particularly in education, led these gains, cushioning losses in other industries.
The Inland Empire, including Riverside and San Bernardino counties, recorded unemployment near 5.9%. Job gains in government and healthcare were offset by losses in construction, financial services, hospitality, and transportation. This balance reflects the region’s exposure to both population-driven services and more cyclical industries.
In parts of the North Bay, unemployment rates declined across several counties despite statewide job losses. These areas benefited from local industry mixes less dependent on large-scale tech employment, underscoring how regional diversification can soften broader economic downturns.
What’s Happening In The Bay Area Amid Tech Layoffs
The Bay Area remains at the center of California’s tech-driven employment shifts. Corporate layoffs and restructuring have significantly reduced headcounts across Silicon Valley and San Francisco, contributing to statewide losses in professional and business services. These reductions have affected corporate offices, research labs, and support functions tied to the technology sector.
At the same time, county-level data show that the Bay Area is not uniformly declining. In September, the San Francisco metropolitan area added roughly 300 jobs, and the broader Bay Area recorded a net gain of about 500 positions. These gains are modest, but they indicate that non-tech sectors such as healthcare, government, and local services continue to generate employment even as the tech workforce contracts.
How California Compares To The Rest Of The Country
California’s labor market slowdown stands out in a national context. While U.S. job growth has cooled compared to earlier periods, national employment figures continued to show modest expansion during the same timeframe that California recorded losses. The divergence highlights state-specific challenges tied to industry concentration, cost pressures, and business investment patterns.
High living costs, regulatory complexity, and ongoing population outflows have all been cited as factors that may be weighing on job creation. Forecasts from state analysts suggest that sluggish job growth could persist through the remainder of 2025, keeping unemployment elevated relative to the national average even if broader economic conditions improve.
What This Means For California’s Economy Going Forward
Four consecutive months of job losses do not signal an immediate economic crisis, but they do point to a labor market undergoing structural adjustment. California is shedding jobs in high-wage, corporate-driven industries while continuing to add positions in healthcare, government, and population-based services. This shift has implications for income growth, tax revenues, and regional economic balance.
The uneven recovery also raises policy questions about how the state supports workforce transitions, encourages business investment, and balances its reliance on technology with broader economic diversification. As California moves deeper into 2026, the direction of its labor market will depend on whether growth in stable service sectors can offset continued weakness in professional and tech-driven employment.
